Bill Knight – October 25
11:01 am
Wed October 24, 2012

Constitutional Amendment Won’t Fix Pension System

Most Illinois voters might be surprised by their ballot when they vote next month – but they’ll be shocked by the consequences if it passes. Proposed Constitutional Amendment 49 “adding Sec. 5.1 to Article XIII,” claims to address the state’s pension obligations.

First, given the shortfall of more than $80 billion in Illinois’ five pension plans, voters should ask how a new Sec. 5.1 would deal with the money the state owes those pensions. It does nothing.

Next, voters should ask how Sec. 5.1 would deal with benefits promised to state employees or retirees, who accepted work that paid less than the private sector and no Social Security in exchange for a state pension. It does nothing.

Lastly, voters should ask how Sec. 5.1 would deal with the future – especially schools, townships, communities, counties and Illinois’ other governmental units (already coping with state requirements on the one hand and late state payments on the other). It does nothing – except hamstring local officials.

Implying that pension costs are driving the state’s debt, the proposed Sec. 5.1 says, “No bill, except a bill for appropriations, that provides a benefit increase under any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall become law without the concurrence of three-fifths of the members elected to each house of the General Assembly.”

If 60 percent of voters agree, they’d change the state constitution, which currently says, “Membership in any pension or retirement system of the state or any local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

Supporters say it would help prevent unfunded future liabilities, provide better accountability, and require greater consensus. Also on board are editorial-writing friends who argue that since people are living longer, the amendment makes “good financial sense… For too long, lawmakers’ hands have been tied.”

Hardly! For years, the legislature’s hands have been in the till, taking from pensions rather than making required contributions.

The shortfall in the pension systems stems from “the state’s decades-long practice of intentionally borrowing revenue from ‘promised’ contributions to the retirement systems in order to subsidize the cost of delivering public services,” noted the Center for Tax and Budget Accountability (CTBA) this summer.

Since 1994, the state contributed its pension share once (in 2004). Four times it paid less than one-third of the mandated amount. The Sec. 5.1 amendment misleads; the problem isn’t pension benefits; it’s state contributions.

The state borrowed the funds and now complains about the lenders. Borrowers – even state government – should have no concern about how lenders use money, whether tithing to church, buying a truck or going to ballgames.

Just pay back the loan!

The Sec 5.1 amendment itself would do nothing to pay back what the state took from pension systems (nor compel Illinois to make required contributions). It restricts government employers and employees alike, creates confusion on what’s a “benefit increase,” guarantees an expensive lawsuit, and makes government service less attractive to good people recruited to work here.

Still, some editorialists say that since many private employers have killed pensions – presumably, replacing them with casino-style hopes such as 401(k)s, at best – people should accept that and not plan to retire and “count on others to fund their retirement.” What?

Consumers, stockholders and “others” fund research, production, marketing, etc.; that’s commerce. “Others” fund roads, schools and police – others who don’t drive every route, have kids in school or are crime victims. That’s society.

Also, while 3 out of 5 doesn’t seem like a big deal, demanding 107 out of 177 (36 of 59 Senators and 71 of 118 Representatives) rather than half-plus-1 (90) votes would put a minority in control in Springfield – where the problem originated! More mischief there is possible with Sec. 5.1’s Part (d), which says, “Nothing in this Section shall prevent the passage or adoption of any law, ordinance, resolution, rule, policy, or practice that further restricts the ability to provide a ‘benefit increase,’ ‘emolument increase,’ or ’beneficial determination’ as those terms are used under this Section,” meaning lawmakers could henceforth ignore the constitutional guarantee.

The Sec. 5.1amendment shifts the blame for the legislature’s inability to resist borrowing from pensions and onto the shoulders of the victims of irresponsible legislators. Promised retirement benefits, public workers have paid into their pension plans and planned their lives accordingly.

The solution – paying back to the five pension systems what state government borrowed – needs the General Assembly to negotiate with the pension systems and agree to a workable repayment schedule over the next few decades, not eliminating constitutional rights.

Bill Knight is a freelance writer whose newspaper columns are archived at billknightcolumn.blogspot.com The opinions expressed are not necessarily those of Tri States Public Radio or Western Illinois University.